Why Zip (ASX:Z1P) and this explosive ASX growth share could be buys

Here are a couple of growth shares growing rapidly…

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The Australian share market is home to a number of quality companies with solid growth prospects.

Two that have been tipped to grow very strongly over the long term are listed below. Here’s why analysts think investors should be buying their shares:

Life360 Inc (ASX: 360)

The first ASX growth share to look at is this San Francisco-based technology company. It is the app maker behind the hugely popular family-focused Life360 mobile app, which is used by 28 million monthly active users globally.

It has been a very strong performer in recent years and has continued its explosive growth in 2021. For example, Life360 recently revealed that it expects its annualised monthly revenue to be at the high end of its guidance of US$110 million to US$120 million this year. The high end represents a 34% year on year increase.

This could be boosted further in the second half by a highly successful marketing campaign on TikTok and a recent bolt-on acquisition. The latter has expanded its offering and opened up cross-selling opportunities.

One broker that remains very positive on the company and is forecasting very strong growth in the coming years is Bell Potter. Earlier this month its analysts retained their buy rating and lifted their price target on the company’s shares by 19% to $9.25.

The broker lifted its price target after a similar business, Nextdoor, was acquired by a special purpose acquisition company (SPAC) on significantly higher multiples. Bell Potter notes that Life360 is a year or two behind Nextdoor in scale, but is a better quality business. Particularly given that its subscription revenue is stickier and more recurring than Nextdoor’s advertising revenue.

Zip Co Ltd (ASX: Z1P)

Another ASX share that is growing at a rapid rate is Zip. It is a leading buy now pay later (BNPL) provider with operations across several continents.

Last week it released its fourth quarter update and revealed further strong growth across key metrics. Zip reported a 116% year on year increase in quarterly total transaction volume (TTV) to $1.8 billion and a 104% increase in quarterly revenue to $129.9 million.

Key drivers of Zip’s growth were further increases in transactions, customer numbers, and merchants on its platform. Zip revealed a 230% year on year increase in transaction numbers to 14.2 million for the three months, an 87% lift in customer numbers to 7.3 million, and an 84% rise in merchants to 51,300.

The good news is that the company still has a very long runway for growth over the next decade. This is due to the growing BNPL market in the massive United States market and its continued international expansion. The latter looks set to be boosted by a global rebrand which will see the company operate under the Zip name in all its markets.

Citi is very positive on Zip. Last week the broker responded to its update by retaining its buy rating and $10.25 price target.

Should you invest $1,000 in Zip right now?

Before you consider Zip, you'll want to hear this.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Life360, Inc. and ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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